Eskom could trip SA platinum growth plans
Brendan Ryan
Posted: Fri, 20 Jun 2008
miningmx.com
[miningmx.com] -- PLATINUM is the hottest growth sector in South Africa's mining industry. However, worries are growing over delays to expansions under way and/or planned because of the continued fallout from the electricity crisis sparked by Eskom.
The latest producer to voice concern is Impala Platinum (Implats). It must make a decision by year-end on whether to proceed with the development of its deep-level Leeuwkop mine near Rustenburg, which will cost R3bn.
The problem is that, while Implats has been granted enough power from Eskom to sink a twin-shaft system, it hasn't been guaranteed sufficient power will be allocated to operate the shaft when in production.
"Leeuwkop is scheduled to start production from about 2012/2013 - by when it seems the country's power supply situation should be in far better shape," said Implats executive director Les Paton.
"The project goes to the Implats board for approval in December, at which point we'll make a call on Eskom's promises on future power supply. It will be a difficult decision, but we work very closely with Eskom and we believe we'll have the information available to make the correct decision."
Asked specifically whether Implats might opt to delay its Leeuwkop development, Paton said: "I don't want to pre-judge the board's decision but, yes, we may decide not to sink the shafts if we take a negative viewpoint."
Implats bought Leeuwkop for R4bn when it took over the former African Platinum. The proposed mine will produce around 160,000oz/year of platinum and is a key part of Implats's plans to grow production from two million ounces of platinum to 2.5 million oz/year by 2012.
Implats executive director Shadwick Bessit says the group is currently receiving only 90% of the power it used to draw. The group is coping by running its mines at full output but cutting back on smelting and refining where necessary to keep to its power allocation.
The key issue is whether South Africa's power situation will start to ease from 2012, as Eskom has predicted. The view among some observers is that Eskom's planning looks optimistic.
The first generating set at the 4,000MW coal-fired Medupi power station is scheduled to come on line in 2012. That target date has already been pushed back from the original 2010 estimate. It now looks like the 2012 date could be pushed back further, depending on delays to major plant items being built in the region of China recently hit by a devastating earthquake.
Following close on Medupi's heels was supposed to be development of CIC Energy's Mmamabula power station in Botswana. That's been delayed from its original target start-up date of 2011 and seems as if it could be delayed further due to problems raising the finance, given the project's rapidly escalating construction costs.
Those developments bear out the warning sounded by RBC Capital Markets analyst Leon Esterhuizen at the firm's platinum group metals (PGMs) conference held recently in London. Esterhuizen said the firm had turned more negative on the Eskom situation.
"This is a major change from our previous view that the electricity problem should be resolved without significantly impacting PGM production," he said.
"The electricity problem isn't just a four-year problem. Given the pent-up demand that will be waiting for electricity to come on line, we believe the current squeeze will easily last for more than eight years."
Esterhuizen added: "The most important thing to note about Eskom's current forecast is that it includes a rather large 'hope' for meaningful power generation outside of Eskom over this timeframe."
He said Eskom had planned to access 1,000MW in 2010 and another 1,000MW in 2011 from independent power producers. Half of that was to be supplied from two open-cycle gas turbine stations to be built by US company AES. South Africa's government cancelled the contract in April this year, citing technicalities. But AES said the conditions attached to the deal were no longer worth the investment risk.
Esterhuizen's proposed solution is for South Africa's platinum industry to generate its own power. Many juniors are proposing to do precisely that, with plans to install generating plants of up to 30MW in capacity.
But Paton said that's not an option for Leeuwkop, which will require 60MW to run its deep-level operations. |
